Closing the gap: a comparative view of financial advisors’ and clients’ perceptions, preferences and priorities

Inside

Our third annual Wealth Management Survey presents the views of both financial advisors and wealth management clients in the Americas, across a wide range of age and wealth segments.

Our interviews and analysis uncovered five core themes, detailed below. We also found some key differences between North America and Latin America. Learn more about those here.

Holistic goal planning and wealth transfer are most relevant trends.

Clients and advisors both cite holistic goal planning and wealth transfer as two of the most relevant trends driving the industry. However, our survey suggests that managers have yet to implement effective strategies to capitalize on these trends.

Holistic goal planning has a fairly limited impact on client acquisition and retention, yet it’s the most important trend influencing clients’ decisions to seek out wealth management firms.

This suggests that clients see little differentiation across firms’ planning approaches and are not fully aware of the benefits of their current firm’s planning offering.

Capitalizing on the client desire for goal planning requires not just a differentiated offering that attracts clients but one that communicates the value proposition to clients.

In terms of wealth transfer, advisors and clients both view this as an attrition driver, suggesting firms still have work to do to realize the opportunity, or mitigate the risk, posed by generational wealth transfers.

Portfolio performance returns to prominence.

After several years of focusing on wealth preservation post-2008, portfolio performance has become top of mind again. Both clients and advisors rank it as the most important factor driving client retention and attrition.

This presents a unique challenge for wealth managers who are currently working to shift the focus of the client conversation from performance benchmarks to individual goals.

Firms will be well-positioned to realize the benefits of holistic goals-based planning if they appreciate the magnitude and complexity of the required cultural shift and implement strategies to address the change in client perspectives.

Firm reputation and segment strategies are also important.

Key client behavior drivers beyond the strength of the client-advisor relationship, which are often overlooked by advisors, can also improve client acquisition and retention.

Advisors tend to overestimate the importance of their relationships with clients (although it’s still a primary factor) while underestimating the relevance of firm reputation and segment-specific strategies.

Advisors need to better understand the subtle but relevant differences between boomers and next-generation clients to align firm offerings with demographic segments.

Firms that are able to confront advisors’ gaps in understanding their clients will be in a prime position to optimize their go-to-market strategy and capitalize on these opportunities.

Traditional channels remain vital.

Clients continue to interact with wealth managers through traditional channels, behavior we expect will continue for at least the next three to five years.

Clients view digital channels as playing a complementary role to traditional channels. Digital channels expand, but do not replace, options for clients, and we expect very little full-fledged migration from traditional to digital.

This poses some challenges for wealth managers. They must deliver a consistent experience across all channels while balancing and prioritizing efforts and investments across a wider distribution infrastructure.

Wealth transfer and succession planning are key risks.

Although the demographic trends and implications of baby boomer clients and advisors retiring have been discussed for over a decade, advisors still consider generational wealth transfer and a lack of business succession planning to be among their top business risks.

Firms need to revisit their current strategies and focus on acquiring the next generation of clients as well as advisors. Talent acquisition and development is one of the areas where advisors are the least satisfied with their firms.

Firms should also appreciate that the talent development methods that worked for baby boomer advisors might not work for the next generation of advisors. That could mean revisiting incentive structures, branch support models and teaming incentives.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.